Punishing American Consumers

In the current U.S. Congress a gaggle of Republicans led by Speaker Paul Ryan are advocating a huge tax increase that makes the American Consumer the greatest victim of taxation in history.

They call it the Border Adjustment Tax (BAT). It should be named “Death by a thousand little taxes on millions of Americans.” Speaker Paul Ryan and House Ways and Means Chairman Kevin Brady (R-TX) are the leading proponents of the import tax.

Simply put, all imports would be taxed and all exports would not.

Whether a car, ball point pen or turquoise necklace from Mexico, each item would have a 20 percent tax applied to it when it enters the United States. The tax would be paid by the importer who would pass it on to the retailer who would pass it on to the consumer. You and me. What would normally cost $1000 (Flat screen TV, for example) would now cost $1200.00.

To be blunt, that is stupid. Will that tax bring back any jobs that have left the U.S. by normal business attrition or for survival in the global economy?

Brady: “My current thinking on border adjustment — after listening to our businesses large and small and our members — is a very gradual five-year transition.”

Big deal; that means the $1000 flat screen television would only cost $1050 the first year crawling to $1200 in the 5th year. Ridiculous. Five years ago, I paid $549.00 (including 8 percent CA sales tax) for my 45-inch flat screen at Walmart. Today, I can buy a 50-inch flat screen at Walmart for $350.00 (including CA sales tax) thanks to competition. Brady would increase that $350 purchase to $420 because neither he nor his supporters have the courage to truly reform our tax system.

Why should 330 million Americans suffer this huge tax hit because Congress doesn’t have the courage to design real tax reform? First, the income tax should be adjusted to three simple rates: 5, 10 and 20 percent with the 20% level being applied to anything above $250,000 ($500,000 for couples). Deductions would be limited to five percent for educational and charity giving and mortgage deduction to one residence only.

Brady argues that the BAT will prevent companies from moving their jobs and headquarters overseas. For example, Ireland has only 4.5 million people but has a huge trade surplus with the U.S. because many American companies have moved there for its highly favorable corporate tax system. Punishing 330 million people to hopefully save a handful of jobs is ridiculous, short-sighted and designed to punish the average American. Lowering or abolishing corporate taxes will save jobs.

Thankfully, consumer advocates, importers, top Trump Administration officials, Republican Senators and some House members have coalesced opposition to the BAT. That has forced Brady to stretch his proposal to a five year transition.

Brady baloney: “Businesses need plenty of time to assess their current supply chain and decide what — if any — can return to the United States…And they want plenty of time to see how the dollar adjusts and at what level.” Translation: He doesn’t have the votes.

“Chairman Brady’s proposed five-year transition does nothing to change the harmful impact on consumers, it only delays the political consequences for lawmakers,” says Joshua Baca, spokesperson for a coalition of retailers and trade groups called Americans for Affordable Products.

Retail Industry Leader Association’s Brian Dodge in The Hill: “Forcing consumers to pay more so that some profitable companies can operate tax-free is no better of an idea in five years than it is today…The result will be the same — higher prices on food, gas, prescriptions, electronics, clothes and thousands of items American families need every day.”

Senator Lindsey Graham (R-S.C.) says that the Brady plan wouldn’t get 10 votes in the Senate. It probably won’t get enough votes in the House.

The best protection for 330 million Americans is for Congress to get out of Washington so they can’t do any more damage.

Mark Twain put it best: “No man’s life, liberty, or property are safe while the legislature is in session.”

Contreras is the Author of “The Armenian Lobby & American Foreign Policy” (Berkeley Press 2017) and The Mexican Border: Immigration, War and a Trillion Dollard in Trade” (Floricanto Press 2016), he formerly wrote for the New American News Service of the New York Times Syndicate.

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